Dearness Allowance is one of the important issues that the Pay Commission deals with. The calculation method that was recommended by the 6th Pay Commission was radically different from the ones suggested by all the previous Pay Commissions. Dearness Allowance, which was increasing by 1 or 2% until the 5th Pay Commission suddenly shot up to the peak of double-digit numbers.

Until the 5th CPC, the Consumer Price Index Number for Industrial Workers 1982 = 100 was used for calculating dearness allowance. From the 6th Pay Commission onwards, CPI (IW) 2001=100 was used for calculating the DA.

There was another crucial change that the 6th CPC made. It recommended that the Reference Base Index be changed from 306.33. As a result, 115.76 became the new Reference Base Index from 01.01.2006 onwards.

Will the 7th CPC introduce a new CPI (IW)? Or will it bring about changes in the Reference Base Index?

This is something that everybody wants to know.

Just watch the difference between 5th and 6th CPC DA Calculation methods…

5th CPC calculation method is given below…

The extant formula for calculation of DA till 1-1-2004 was:

12 Monthly Average – 306.33
——————————————————–  x 100 = percentage increase in prices
306.33

The Fifth Pay Commission had recommended that DA should be converted into DP each time the CPI increased by 50% over the base index. The Government merged 50% of DA with the
basic pay w.e.f. 1-4-2004. The formula for calculation of DA for the period from 1-7-2004 is:

12 Monthly Average – 306.33
{  ————————————————  x 100} – 50 = percentage increase in prices
306.33

6th CPC calculation method is given below…

(12 Monthly Average) – 115.76
——————————————————–      x 100 = percentage increase in prices
115.76

Source: http://7thpaycommissionnews.in/

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